Fed holds course on lowered US growth forecast

Traders work on the floor of the New York Stock Exchange (NYSE) on June 18, 2014 in New York City. The Federal Reserve slashed its 2014 growth forecast for the US economy after the rough winter but kept policy on hold on Wednesday, showing faith in a modest rebound. -- PHOTO: AFP

WASHINGTON (AFP) - The Federal Reserve slashed its 2014 growth forecast for the US economy after the rough winter but kept policy on hold on Wednesday, showing faith in a modest rebound.

Fed Chair Janet Yellen said the economy had picked up after the first quarter’s contraction, but she also downplayed a pickup of inflation as any sign of a need to tighten monetary policy.

As expected the Federal Open Market Committee cuts its stimulus program back by another US$10 billion (S$12.5 billion), to US$35 billion a month, compared with US$85 billion in December before the taper began.

It also left the benchmark federal funds interest rate at 0-0.25 percent, where it has been since the end of 2008, arguing that the economy still needs such extraordinary accommodation into next year, when the rate is expected to rise.